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Tumultuous Indian stock markets!!

The last two days has seen record falls in the major Indian stock indices across the board. The NIFTY which was trading around 6000 levels on Thursday (Jan 17) went down and touched 4455 on Jan 22 (Tuesday), a fall of more than 1600 points on the NIFTY. The NIFTY has fallen around 29% from the record high of 6300 it touched sometime back.

The fall of the markets was justified on account of the poor economic condition in US, continuous fall in other major stock indices across the world, the higher crude oil price and huge write-down by financial institutions on account of sub-prime meltdown. But if you ask me did I expect this steep correction, honestly I have to admit, I didnt. All along whenever the world markets corrected, we were insulated and it was always claimed that Indian markets were de-coupled from the world markets. I was expecting a minor correction of 300-400 points on the NIFTY but the markets corrected four times more than that. A good lesson learnt!

When the markets opened on Tuesday, it was widely expected to fall following the weak Asian markets which opened before the Indian markets. The markets opened and got closed within few minutes following the 10% lower circuit for the index. Markets re-opened after 1 hour after the cooling off period and showed some signs of reversal but not could not sustain the momentum. The real recovery in the indices happened towards the close today more due to the short covering in the market rather than due to fresh buying, I guess. The sector which has got hit badly is Power and Real Estate from the data I collected. DLF, Parsvnath, Omaxe, Patel Engg, Peninsula Land, Ansal Housing are few of the Real Estate stocks which has corrected heavily.

There is absolute liquidity crunch for the retail investors in the market due to two major IPO's of Reliance Power and Future Capital Holdings. Both have collected huge chunks of money from the investing public and they are not due to be returned atleast for the next 15 days. Margin calls were triggered in the morning and investors were forced to sell their long term holdings to meet the margin requirements. Most the brokerage houses could not execute the orders because of the poor margin arrangements for individual broking houses with the exchange. I personally felt that with Geojit and Sharekhan broking houses. I called Geojit Securities to place an order but was turned down by the dealer to place the order citing the reason that there is no margin available. I explained to him that I want to place a cash market order and not in futures and options segment. But I was informed that they are only taking orders for squaring off existing positions and not for initiating fresh positions even in the cash market. Most of the investors would have faced a similar situation. Sorry state of affairs even for people who wanted to pick up shares in the discount sale!!

The volatility during the last two days were phenomenal and the prices moved very violently. The intraday movements were so huge it is highly unimaginable. For instance, the intraday movements in Bajaj Auto was Rs500, Patel Engg Rs100+, M&M Rs100+ just to name a few. The other thing is the difference between the bid and ask price was also very wide. This may be due to lack of volume as most of the investors could not enter because of the severe margin pressure on the brokerages.

I have listed few shares which have corrected by more than 40% in the last one week or so. These shares may correct further and nobody knows what is the real bottom at this stage. If you like a company and convinced about the fundamentals, this crash has really proved a boon for the investors to pick up these stocks at attractive prices compared to what they were 1 week ago.

RPL - 147
M&M - 600
ITC - 183
JK Lakshmi - 109
Microtech - 207
Petronet - 63
GHCL - 97
MTNL - 116
IDBI - 99
Guj Alkali - 152
Bata - 175
Guj NRE - 105
Surya Pharma - 88
Varun ship - 67
Power Grid - 99
Patel Eng - 725
Ind Hotels - 111
Hotel Leela - 41
Bongaigaon - 51

A word of caution, please check the fundamentals before you buy the scrip and be informed that I may already own some of the shares listed above.


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